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Covid-19 impact on the GCC’s travel and tourism sector: When will it pick up again?

Covid-19 impact on the GCC’s travel and tourism sector: When will it pick up again?

The travel and tourism industry has indisputably faced the biggest brunt of the Covid-19 pandemic. Are there answers on when things will improve?

When enticing pictures of emerald beaches and enchanting desert temples were splashed across ad banners worldwide last year, few guessed that they were looking at Saudi Arabia. And then the kingdom made headlines worldwide as it opened its doors to foreign tourists for the very first time. Luring visitors with the opportunity to discover unseen sites, the kingdom welcomed thousands within the first few
days of issuing tourist visas in September.

And then came Covid-19.

The tourism sector has been devastated by the pandemic, as countries closed international and regional boundaries to curb its spread. International tourist arrivals dropped 22 per cent during the first quarter of 2020, according to the UN World Tourism Organization (UNWTO).

Looking ahead, the crisis could lead to an annual decline of between 60 per cent and 80 per cent, with “millions of livelihoods at risk”, the agency warned.

The importance of the travel and tourism sector is hard to understate – it accounted for one in four new jobs created in the past five years worldwide, according to a report by the World Travel and Tourism Council (WTTC) and Oxford Economics.

Globally, the industry grew 3.5 per cent in 2019, outpacing the global economic growth of 2.5 per cent, the report found.

Looking at the GCC, the travel and tourism sector accounted for $245bn or 8.6 per cent of total GDP in 2019, according to WTTC.

Estimates released by the UNWTO in 2019 suggested that the GCC is poised to attract 195 million visitors by 2030, above the global average for any one region.

“With the effects of the pandemic still being felt in the region, it is difficult to know how significant the damage will be,” says Nicholas Naples, CEO of Amaala, the mega-project coming up on the Red Sea coast in Saudi Arabia.

Dubbed the ‘Riviera of the Middle East’, Amaala is a key component of Saudi’s Vision 2030. Spread across 3,800 sqkm, the ultra-luxurious destination will include 2,500 hotel keys and more than 800 residential homes, alongside 200 high-end retail, F&B, wellness and recreational outlets.

“As we break ground this year at Amaala, we will pay close attention to the lessons learnt this year. What we can be certain of though, is that travel will return,” he says.

Looking at aviation specifically, the International Air Transport Association (IATA) estimates that airlines globally will lose $314bn in revenues this year due to the coronavirus impact and will require $200bn in government aid.

For Middle East carriers, the forecasted revenue loss stands at $24bn, with UAE airlines alone projected to face a loss of $6.8bn and a passenger drop of 31 million.

“Covid-19 has systematically and absolutely battered travel across the GCC. The region was still arguably amidst its growth phase and now, it’s all come to a crashing halt,” says Saj Ahmad, chief analyst at StrategicAero Research.

According to Robin Kamark, chief commercial officer at Etihad Aviation Group, the immediate concern for all airlines is on remaining cash sustainable.

Despite the UAE – similar to other nations – banning international travel in late March, Kamark says not all of Etihad’s passenger aircraft have remained on the ground.

The carrier has been operating special passenger, freighter and cargo flights.

“These include flights to destinations that we have never flown to before, such as Oslo, shipping consignments including medical equipment and pharmaceuticals not only inbound to the UAE, but also to other countries in need of critical supplies,” he says.

However, the Abu Dhabi airline has been forced to make redundancies to weather the storm. Dubai-based Emirates, which has also been operating only special flights, has announced massive salary cuts and is also looking at ways to tighten costs.

According to Ahmad, airlines worldwide have slashed routes, withdrawn fleets, cut staff numbers, deferred refunds – all for cash preservation.

“Adaptations are taking place, but the reality is that there will be casualties – and big ones,” he opines.

THE MAGIC QUESTION
The situation is dire, but is there an end in sight?

“In all honesty, it is impossible to say. One thing we do know is just how resilient the travel industry is and that people’s desire to travel will not subside,” says Naples.

According to Muzzammil Ahussain, EVP of Consumer Travel at Saudi-based tourism agency Seera Group, domestic travel is expected to open up first in the kingdom.

“We are creating attractive packages for Saudi travellers to discover their own country better. In Saudi Arabia, there are lots of regions that are waiting to be explored, far beyond the obvious main cities of Riyadh, Jeddah and Dammam,” he says.

As for the UAE, staycations are sure to be on the rise, he adds.

From an aviation point of view, Etihad’s Kamark anticipates a gradual resumption to normal operations.

“Aviation will return to growth but the question is when. The reality is that the repercussions of Covid-19 will likely be felt in our industry for a very long time. At a minimum, travel demand may not return to what it was before this pandemic until the back end of 2021 and most probably, and highly likely, into the later part of 2022,” he says.

Ahmad’s outlook is also not optimistic.

“Sadly, the aviation industry still has not reached the bottom of the cliff. Delays to flights, longer waiting times, longer security and health screening as well as earlier check-in times means that the wider industry will not see any meaningful recovery until a vaccine or medicinal suppressant to Covid-19 emerges. Any meaningful recovery, if it ever emerges, will happen on the wrong side of 2022 or beyond. And that’s a rather bullish sentiment,” he opines.

Longer-term, industry players will also need to contend with a changed set of requirements from consumers.

“Travel in this new ‘normal’ will look and feel different, and we will need to adapt. People will want options that are closer to home that they can even drive to. They will want safer, lower density accommodation and for some, more affordable options. Industry players must adapt to the demands of this new environment,” says Naples.

“It is key that businesses are clever in their approach of rethinking how we can define this reawakened world of travel.”

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